Thursday, December 04, 2008

EXCLUSIVE: WARTSILA discusses decentralised power plants and green stakeholders

In an exclusive interview for the World Future Energy Summit 2009, WARTSILA discusses decentralised power plants and green stakeholders. WARTSILA will be exhibiting in Abu Dhabi on Jan 19-21, 2009.

How cost efficient is it to have a decentralized power plant? Does the build out way the cost benefit?

The answer is “it depends”, but in most cases where the load centre is at a distance, it is easy to empirically show that decentralized power generation is more cost efficient. New generation cannot be added on without addressing its impact on transmission and distribution. Typically this means capex on both the transmission lines and on substation upgrades. This also typically means system losses on both transmission and distribution. By effectively “cutting out” the transmission requirements and generating at distribution voltage levels, a decentralised power plant generating at the load centre can be more cost effective compared to the traditional centralized power plant with power being stepped up, transmitted across large distances, and being stepped down once more. The key is to measure the cost at the delivery point, not at the generation point.

What growth has there been in the decentralized power industry?

There has been substantial growth in the decentralized power industry in the developed world – in, for examples the US, Europe and Japan. There have been several reasons for this growth, starting from the realization that an intelligent grid is a combination of centralized base load power plants and load-following or peaking decentralized power plants that provides an overall lower cost of service to the consumer (because of the arguments noted above). Liberalization has also helped – free market and transparency over the cost structure has led to both utility planners and private generators to take advantage of “nodal factors” and place their generation closer to the load centres. It is also typically during the peak times that grids face congestion – the capacity might be there on the system but if power cannot be transmitted to the load centre there may be brownouts. Therefore decentralized power also helps with grid stability.

What new technology has Wärtsilä launched or new services offered lately?

The core of Wärtsilä’s offering remains the same – power plants based upon reciprocating engines. What we are offering are new solutions based upon the existing technology of reciprocating engines: High simple cycle efficiencies, fuel flexibility – the ability to run on a wide variety of gases (pipeline quality, direct LNG injection, flared associated gases) and a wide variety of liquid fuels (heavy fuel oil, light fuel oil, crude oil and liquid bio fuels), operational flexibility, fast dispatch response, zero water requirements for cooling, part-load operations, reduced CO2 foot print, and ancillary services support. These are all features that allow Wärtsilä to offer probably the most flexible power plant on any grid system.
We are also unveiling for the Middle East region, a district power & chilling solution which utilizes the high simple cycle efficiency and waste heat from the engines to provide chilled water for district cooling at least 30% more efficiently – this is not a new product for Wärtsilä, but it is new to the region as convention has been only to have large centralized power stations with no synergies on the district cooling side.

What does the Middle East market mean for WÄRTSILÄ?

While Wärtsilä has been in the Middle East for over 25 years, we still feel that our products and services are not that well known in the power sector. We have some very interesting solutions for the market, and while these solutions are tried and tested in other parts of the world, they are a bit unconventional compared to the modus operandi. So for Wärtsilä, it means that we have to do a lot of work to convince policy makers, utility planners, industrial companies that in these uncertain economic times, fuel flexibility is an important consideration, decentralized power is a good compliment to base load projects to improve overall system efficiency, and combining chilling & power is a sustainable cheaper yet greener solution. The potential is huge.

Do you think shareholders are more conscientious than before? Has sustainability affected their expectation on share prices and dividend returns?

We absolutely believe so. There is finally a tacit realization that global warming is a problem and countries, governments, corporations and individuals alike must do their bit to promote a greener and sustainable world. The pressure is on for companies such as ours to not only be responsible corporate citizens towards the environment in our way of working but also to produce products and solutions that are more efficient, less polluting and have smaller carbon foot prints. We believe that it is also possible to maintain fair level of returns while making the world a cleaner place.

WARTSILA will be exhibiting at the World Future Energy Summit, January 19-21, 2009

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